QUESTION 3 (This question has three parts, (a), (b) and (c))

Abacus Property Group, a diversified property group listed on the Australian Stock Exchange (ASX), have asked you to evaluate an office building they would like to purchase. . You find the following information about this property:

Valuation date: Today Net lettable area: 7500m2

Current Market rent rate: $ 430/m2 per annum

Annual growth rate of market rent: 4% in first three years, and 3% after that Miscellaneous income: $6,000 per annum

Vacancy and collection allowance: 4% of potential gross income Operating Expenses: 10% of potential gross income

Depreciation: $90,000 per annum

No capital adjustment, acquisition cost or selling cost is required

You have also found the information about Abacus Property Group: Loan to value ratio for this investment: 30%

Loan annual interest rate: 4%

Expected rate of return on the equity of Abacus Property Group: 12% Corporate tax rate:30%

Holding period of property asset: 3 years

You have recently appraised the comparable sold evidence listed below:

Comparable	NOI ($)	Selling price ($)	Weight based on similarity
1	300,000	3,900,000	50%
2	315,000	3,800,000	30%
3	305,000	3,900,000	20%

question

1. Value the above property using the DCF model (investment value).